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India slaps a $88 million import tax debt on Xiaomi

Xiaomi India and its contract manufacturers have been found to evade customs duties worth $88 million (INR 653 crore) by an investigation by the Directorate of Revenue Intelligence. 

The DRI had intelligence that Xiaomi was dodging customs duty using undervaluation, which led to the investigation and three show-cause notices to the Chinese mobile manufacturer.

Searches were conducted on Xiaomi India premises as part of the investigation, which resulted in the recovery of documents pointing towards Xiaomi India remitting royalty and licence fee under contractual obligation to Qualcomm USA and Beijing Xiaomi Mobile Software.

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As big as they come

Xiaomi India or its contact manufacturers weren’t including the royalty they paid to the assessable value of the goods imported — a violation of Section 14 of the Customs Act. 1962 and Customs Valuation Rules 2007. The Finance Ministry reported having taken statements of key personnel at Xiaomi India, where one director confirmed the payments. 

However, according to the South China Morning Post, the company said that the payments in question are related to transactions April 1, 2017, and June 30, 2020, and have nothing to do with Xiaomi’s India business. This is the exact amount of time for which the Finance Ministry is demanding recovery.

The investigation further revealed that Xiaomi India’s smartphone sales consist of Mi branded smartphones imported by Xiaomi or assembled in India by its contract manufacturers using imported components.

This isn’t Xiaomi’s first cross with Indian authorities either. Back in 2020, several of Xiaomi’s Mi apps that come preinstalled on its phones were banned by the Indian Ministry of Information Technology, among other apps citing security concerns. 

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